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Housing gives UK construction a lift
Source: Bloomberg News |
June 5, 2013, Wednesday
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Print Edition
UK construction unexpectedly returned to growth last month and retail sales increased, adding to indications of a tentative economic recovery.
An index of building activity rose to 50.8 from 49.4 in April, Markit and the Chartered Institute of Purchasing and Supply said in London yesterday.
This is the first reading above 50, which divides expansion from contraction, since October. A separate report from the British Retail Consortium showed like- for-like retail sales increased an annual 1.8 percent in May.
Recent economic data have suggested some signs of strength in the economy, with Markit's factory index climbing to a 14- month high in May. Still, the recovery has not yet fully taken hold and Bank of England Governor Mervyn King, who will lead his last policy meeting this week before retiring, has said that growth is not as strong as he would like.
"The May data reinforced further the trend seen in recent months of a stabilization in construction activity," said Blerina Uruci, an economist at Barclays Plc in London. Still, "much of the recent increase in activity seems to rely on just residential construction, which leaves the index prone to further volatility should the recent housing contraction improvement fizzle out."
Economists had forecast that the construction index would increase to 49.8, according to the median of 14 estimates in a Bloomberg News survey. Homebuilder Barratt Developments Plc said last month that the market backdrop "is the most positive we have seen for five years."
Markit said construction output was led by a "robust expansion" of homebuilding, while commercial and civil engineering activity declined. The industry is "worryingly reliant on residential building for thrust," said economist Tim Moore.
The BRC and KPMG report showed that total retail sales rose 3.4 percent in May from a year earlier.
An index of building activity rose to 50.8 from 49.4 in April, Markit and the Chartered Institute of Purchasing and Supply said in London yesterday.
This is the first reading above 50, which divides expansion from contraction, since October. A separate report from the British Retail Consortium showed like- for-like retail sales increased an annual 1.8 percent in May.
Recent economic data have suggested some signs of strength in the economy, with Markit's factory index climbing to a 14- month high in May. Still, the recovery has not yet fully taken hold and Bank of England Governor Mervyn King, who will lead his last policy meeting this week before retiring, has said that growth is not as strong as he would like.
"The May data reinforced further the trend seen in recent months of a stabilization in construction activity," said Blerina Uruci, an economist at Barclays Plc in London. Still, "much of the recent increase in activity seems to rely on just residential construction, which leaves the index prone to further volatility should the recent housing contraction improvement fizzle out."
Economists had forecast that the construction index would increase to 49.8, according to the median of 14 estimates in a Bloomberg News survey. Homebuilder Barratt Developments Plc said last month that the market backdrop "is the most positive we have seen for five years."
Markit said construction output was led by a "robust expansion" of homebuilding, while commercial and civil engineering activity declined. The industry is "worryingly reliant on residential building for thrust," said economist Tim Moore.
The BRC and KPMG report showed that total retail sales rose 3.4 percent in May from a year earlier.
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